July 2016

July 2016

Join us in an inspirational and enlightening evening on the 3rd floor of the Santa Monica Promenade Mall on Thursday, August 11, 2016 from 5:30 PM to 9:00 PM! Our curated panel of experts will share their stories and experiences along with priceless advice for any aspiring entrepreneurs. Our experts range in their expertise but have one thing in common—their undeniable hustle. Come meet our experts, get inspired, and network with Silicon Beach’s entrepreneurs, investors, attorneys, and our panelists! This is an event you will not want to miss!
Open bar and refreshments are complimentary with your ticket.

Congratulations to Managing Partner Dan Cislo’s Son, Kelley D. Cislo, on Being Commissioned as First Lieutenant in the U.S. Army Reserve, Cyber Command

On July 20, 2016, in Fort Knox, Kentucky, Kelley D. Cislo was commissioned as First Lieutenant as part of America’s Cyber Command and will be one of our cyber warriors in the U.S Army Reserve.

We could not be prouder of Kelley, who has spent his summers working at Cislo & Thomas and also helped develop Patentfiler.com.

Data Scraping Rules Clarified in the 9th Circuit

Takeaway: Web scraping after receiving a cease and desist letter is held by the 9th Circuit to be in violation of the Computer Fraud and Abuse Act (“CFAA”).

Recently, the 9th Circuit Court of Appeals clarified the web scraping debate in Facebook v. Power Ventures, 2016 DJDAR 7051 (July 12, 2016). The 9th Circuit held that for a publically accessible website, although the legality of scraping has not been clarified, a cease and desist letter withdrawing authorization for an entity to access a website triggers liability for scraping from that point forward, under the CFAA.

Other circuits have held similarly. North District of Texas held in Southwest Airlines Co. v. Farechase Inc., 318 F. Supp. 2d 435 (N.D. Tex. 2004) that even if a plaintiff’s browsewrap terms prohibiting scraping were insufficient to show that defendant accessed without authorization, their repeated warnings and requests to stop were enough. Most recently in the Northern District of Indiana, a plaintiff sued defendants for automated and manual scraping and the court denied motion to dismiss the cause of action under the CFAA.Couponcabin LLC v. Savings.com Inc., 14-39 (N.D. Ind. June 8, 2016).

The cases leave the question open as to whether scraping created liability under the CFAA even before receiving cease and desist letters and for the most part, most courts focused more on whether or not there was enough notice that its scraping activities were without authorization. QVC Inc. v. Resultly LLC 99 F. Supp.3d 525 (E.D. Pa. 2015).

All in all, at least to once put on notice by cease and desist letter, further scraping of a website may be deemed by the 9th Circuit to violate the CFAA.

The U.S. Government Accountability Office (“GOA”) Releases Study on UPSTO Patent Quality and Statistics

Takeaway: The U.S. Government Accountability Office (“GOA”) released its findings that the district court filings of new patent infringement lawsuits have increased from 2,000 in 2007 to more than 5,000 in 2015, with the number of defendants increasing from 5,000 to 8,000 respectively.

In 2007, the percentage of suits filed in the Eastern District of Texas was about 20 percent, and by 2015, the percentage rose to nearly 50%, mostly because the Eastern District of Texas has a proven track record of being favorable to patent owners. The GOA also found that most of the suits were related to software patents because the technologies associated with the patents were unclear and overly broad, and thus easy to unintentionally infringe.

The United States Patent and Trademark Office (“USPTO”) has tried to address patent quality through its Enhanced Patent Quality Initiative, for example. Unfortunately, based on GAO’s survey of patent examiners, approximately 70 percent of the examiners say they do not have time to complete a thorough examination given a typical workload.

The GAO suggests that the USPTO more consistently define patent quality and articulate actual definitions for more guidance, reassess the time allotted for examination, and require more clarity from patent applicants.

Patent Counsel’s Opinion Can Help Avoid Finding of Willful Infringement

Takeaway: A finding of willful infringement may result in paying up to treble damages as well as the attorneys’ fees of the patent holder without an opinion of counsel.

In light of two recent Supreme Court cases, Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S.Ct. 993 (2016) and Octane Fitness v. Icon Fitness, 134 S.Ct.1799 (2014), the standard for a patent holder to collected increased damages and attorney fees as well as the standard for a defendant to collect attorney fees from the plaintiff have been lowered. Therefore, it is highly recommended that an opinion from patent counsel be sought out in order to reduce possible exposure to either increased damages and/or attorney fees.

An opinion from a patent counsel will not only be strong evidence against willfulness but may also serve as evidence against patent infringement itself in any trial where willfulness is being litigated.

Takeaway: The Federal Circuit recently held en banc in The Medicines Company v. Hospira that, for the purposes of the on-sale bar, a contract manufacturer’s sale of manufacturing services to an inventor does not constitute a “sale” of a patented invention so as to trigger an on-sale bar and invalidate a patent.

The Medicines Company (“MedCo”) sold Angiomax® which is covered by product and product-by-process patent claims. Further, MedCo does not manufacturer Angiomax®, rather it has a third party Ben Venue Laboratories (“BV Labs”) manufacture the drug.

Medco later sued Hospira for their generic version of Angiomax® and Hospira counterclaimed that the patents were invalid under the on-sale bar because MedCo’s “sales” to BV Labs had been more than one year before MedCo filed the patent applications.

The en banc Federal Circuit vacated the panel‘s decision that reversed the district court’s rejection of the defense. The court analyzed that what was sold, the contract manufacturing services, was not the “invention” sold by MedCo. Further the Uniform Commercial Code’s definition of “sale” indicates that BV Labs lacked title to the Angiomax® it manufactured and could not use or sell the product to anyone other than MedCo.

The Court further stated that “[t]here is no room in the statute and no principled reason raised by the parties or any of the amici to apply a different set of on-sale bar rules to inventors depending on whether their business model is to outsource manufacturing or to manufacture in-house.”

It is important to know that post-AIA patents may follow a different analysis. Therefore, when structuring contract-manufacturing agreements, it is important to take into consideration the possibility of the risk of triggering the on-sale bar. So, file your patent application early before such potential sales.

Novel “Ordered Combination of Limitations” in Software Inventions May Be Patentable

Takeaway: The Federal Circuit held that a software-related patent directed at filtering out Internet websites based on some set criteria by employers or parents was improperly found to be patent-ineligible on a motion to dismiss. Bascom Global Internet Services, Inc. v. AT&T Mobility LLC, Fed. Cir., No. 2015-1763, 6/27/2016.

The Court held that the patent claims and limitations were directed to an abstract idea but that there was potentially an inventive concept shown, pointing to the “ordered combination of limitations” as to be a non-conventional arrangement of known, conventional elements.

In the case, the non-convention arrangement of known conventional elements included a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.

In a concurring opinion, Judge Newman advised for a more flexible procedure in determining eligibility, wherein an initial decision on patentability could render the eligibility issue resolved or moot.

Electronic Frontier Foundation (“EFF”) Sues the U.S. Government for “Unconstitutional” Use of the Digital Millennium Copyright Act (“DMCA”)

One of the most highly anticipated lawsuits, filed by EFF against the U.S. Government, on July 21, 2016 will, if successful, strike down one of United States’ most controversial technology laws which the U.S. has been pressuring the rest of the world to adopt.

The rule at issue is section 1201 of the DMCA of 1998, the “anti-circumvention” rule, which makes it illegal to break an “access control,” namely a “digital rights management” (“DRM”) or simply a digital lock, for copyrighted works. This act was lobbied by the entertainment industry along with larger tech companies.

The act allows users to lobby for “exceptions” but EFF claims “the rulemaking itself is an unconstitutional speak-licensing regime.” For example, the Library of Congress allowed hackers to revive defunct games by circumventing copyright protection, unless the games involved a central server and unlocking cell phone was made legal in 2006, and then illegal in 2012 before Congress legalized it. And most recently, the Library of Congress denied petitions requesting permission to copy portions of movies for educational K-12 students for noncommercial filmmaking.

“As a result, it may be unlawful to circumvent an order to create a running critical commentary on a large portion of a political debate, sporting event, or movie, when where such activity would be a noninfringing fair use,” states EFF.

EFF will be met with strong contentions but won’t back down without a fight. The government cannot broadly ban protected speech and then grant a government official excessive discretion to pick what speech will be permitted, particularly when the rulemaking process is so onerous,” said EFF Staff Attorney Kit Walsh. “If future generations are going to be able to understand and control their own machines, and to participate fully in making rather than simply consuming culture, Section 1201 has to go,” he added.

Toyota Files Patents Related to Flying Car Technology

Takeaway: Although they are not the first, and will not be the last, Toyota has made headlines for their patent applications for cars that “provide operators with expanded private travel options.”

U.S. Patent Application Publication No. 2016/0176256 A1

The application filed in 2014, and now made public, discloses a fuselage constructed from flexible frame components and a tensile skin, an actuation system that expands the fuselage to safely house foldable wings in landing mode that then contracts the fuselage after the wings are deployed to improve flight-mode aerodynamics. This, according to Toyota, allows for better fuel economy and visibility as compared to the older models.

Industry experts do not believe we will see a flying car from Toyota any time soon, especially because there are many regulatory (and technological) hurdles to overcome. However, the same experts do believe Toyota may actually be working on such a car, because of the absence of propulsion in their patent application. This may be because any propulsion system is currently the most active subject matter so possibly one or more future filings will be related to Toyota’s aerocar development.

NASA Released 56 Patents to Public Domain

Takeaway: NASA recently announced that a newly established searchable public database of NASA’s expired patents is now available. Although thousands of their patents are already in the public domain, NASA created their own portal which makes it easier to find and examine their patents.

NASA wanted to grab the attention of the private commercial sector to accomplish some of its project goals. For example, last year NASA stated that it was developing its commercial crew program that would bring American spacecraft launches back to American soil and needed the help of the private sector. Cislo & Thomas was very fortunate to have worked on several patent applications for NASA.

The diversity of the types of innovation present in the NASA portal ranges from solar panels to turbomachinery to processing nitrogen oxide into a fertilizer. They also range in how NASA has utilized these patents; some are less likely to be licensed by private enterprise because of the low demand for corresponding products and others cover technologies that still require more development before any there are any market-ready products.

NASA claims that it will also continue working with start-ups in developing technologies into consumer products. NASA’s Technology Transfer Program has been working primarily with startups for non-aerospace applications and currently is involved with around 500 active licenses.

PTAB Rules That Provisional Applications Must Support the Patent Claims of Later Issued Patents to Qualify as Prior Art

Takeaway: Provisional applications may only become effective as prior art if the claims of subsequently-filed issued patent are supported by the provisional application. Prosecuting attorneys faced with 35 USC §102(e) rejections should always evaluate whether it is possible to rebut a rejection by arguing that the claims of the published application or issued patent being applied do not include any claims supported by the provisional application under 35 USC §112.

In brief, the Federal Circuit in Dynamic Drinkware held that Circuit held that an IPR petitioner did not adequately demonstrate that an invalidating reference under 35 U.S.C. § 102(e)(2) was entitled to its provisional filing date because it failed to compare the provisional application to the claims of the reference patent. Furthermore, Dynamic Drinkware argued that the provisional patent was substantially different from the subsequently-file non-provisional such that the provisional’s effectiveness as a prior art reference fatally suffered.

The Court agreed, finding that the claims of the issued patent could not be supported by the provisional application, and that by extension, as a general rule, provisional applications used as prior art references may be disqualified as prior art if it can be demonstrated that a provisional application lacks support for the issued claims.

In other words, a patent used as a prior art reference that claims priority to a provisional does not instantaneously benefit from the priority filing date of the provisional patent application. Rather, the referenced patent only receives its provisional date where at least one claim of the patent is support by the provisional patent application.

The recent PTAB decisions in Ariosa Diagnostics and Benitec both upheld the validity of challenged patents on similar grounds, by holding the petitioner failed to prove any claim of the prior art published patent application was supported by the provisional application.